Tullow Places Shares, Proceeds to Fund Jubilee Phase 1 Development
Tullow has announced its intention to place up to 66,938,141 new ordinary shares (the "Placing Shares") in the Company, representing up to approximately 9.1 per cent of Tullow Oil's existing issued ordinary share capital (“the Placing”), with both new and existing institutional investors.
The Placing is being conducted, subject to the satisfaction of certain conditions, through an accelerated book-building process to be carried out by Merrill Lynch International ("Merrill Lynch") and RBS Hoare Govett Limited ("RBS Hoare Govett"), who are acting as joint bookrunners (the “Joint Bookrunners”). The timing of the closing of the book, pricing and allocations are at the discretion of Tullow Oil, Merrill Lynch and RBS Hoare Govett. The number of Placing Shares and the price at which the Placing Shares are to be placed (the "Placing Price") are subject to agreement between Tullow Oil, Merrill Lynch and RBS Hoare Govett at the close of the book-building process. Details of the number of Placing Shares and the Placing Price will be announced as soon as practicable after the close of the book-building process.
The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 10 pence each in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares after the date of issue of the Placing Shares. The Placing will be made on a non-pre-emptive basis. If all the Placing Shares are placed, it would represent an increase of approximately 9.1 per cent. of the current issued ordinary share capital of the Company, and the Placing Shares would represent approximately 8.4 per cent. of the enlarged issued ordinary share capital of the Company.
The Company will apply for admission of the Placing Shares to listing on the Official List of the Financial Services Authority, to trading on the main market of the London Stock Exchange and trading on the Irish Stock Exchange ("Admission"). It is expected that Admission will take place and that trading will commence on January 26, 2009 (the "Closing Date").
The Placing is conditional upon, inter alia, Admission becoming effective. The Placing is also conditional on the placing agreement between the Company, Merrill Lynch and RBS Hoare Govett not being terminated.
The Appendix to this announcement (which forms part of this announcement) sets out the terms and conditions of the Placing.
Background to the Placing
Tullow's business has continued to perform very strongly in 2008. A 100% exploration success rate was achieved in Ghana and Uganda and overall the Group's exploration drilling program has resulted in 17 discoveries from 22 wells. Booked Commercial Reserves and Contingent Resources are expected to be upgraded to approximately 800 mmboe at the end of 2008 compared with 551 mmboe a year ago.
In Ghana, the recent Mahogany-3 and Hyedua-2 appraisal results have indicated the scope for additional phases of development on the Jubilee field and validated the fast track development decision for Phase 1. Resource potential of up to 1.8 billion barrels for the Jubilee field has been confirmed with a P50 most likely case upgraded to 1.2 billion barrels. Most recently, the Hyedua-2 test flowed at 16,750 bopd. This result has provided a strong underpinning to the Phase 1 Jubilee development by confirming good reservoir connectivity and high productivity which indicates future production well deliverability in excess of 20,000 bopd. In addition, this result has contributed to
Tullow's independent auditor assessing that 170 mmbo of Commercial Reserves can be booked at year end, equivalent to 490 mmbo of gross field reserves. First oil remains on target for the second half of 2010.
In Uganda, the discovery of the Buffalo oil field in December 2008 ensured that the resources threshold for commercial development has been achieved. Significant further exploration success has now been announced this month with the Giraffe discovery, which is one of the largest recent onshore oil discoveries in Africa. These latest results mean that Lake Albert is Tullow's second world class basin and options for commercialisation and first oil production are now being fast tracked.
Phase 1 of the Jubilee development project is now substantially under way. Tullow's existing reserve based lending facility, which matures in 2012, is underpinned by a strong syndicate of 18 banks. Tullow has been working very closely with this syndicate and certain new banks to incorporate the first phase of the Ghana Jubilee project, together with the existing production assets, into a new combined facility of up to $2bn. Approval from banks of facilities of $1.15bn (c.60%) is already in place with the remainder of banks well advanced in their internal process and scheduled to seek credit committee approval before the end of January. Tullow is highly confident of securing an increased reserve based lending facility sufficient to deliver upon its existing development expenditure, including the first phase of the Jubilee field development. Financial close is targeted for February, 2009.
Use of Proceeds
Tullow will fund Jubilee Phase 1 and existing mature production activities from these reserve based lending debt facilities. However, Tullow is now in the middle of a very exciting period for its Ghanaian and Ugandan operations with further transformational exploration wells to be drilled in the first half of 2009. In particular, this includes the Tweneboa and Teak exploration wells in Ghana, which are of a similar play type to the Jubilee field. Tullow may also undertake further appraisal of the Jubilee field beyond Phase 1. In Uganda, Tullow will soon drill the Ngassa well in Lake Albert, the largest prospect identified so far in the region, as well as continuing to appraise and commercialize the area on a fast track basis.
In 2009, Tullow will also seek to augment underlying cash flow through ongoing active portfolio management and careful allocation of discretionary capital. Given the significant success of Tullow's ongoing drilling campaigns, the Company believes that it is now appropriate to increase its equity capital base to finance these exciting growth opportunities. As well as strengthening the balance sheet, today’s placing will allow Tullow to fund selective high impact exploration and appraisal opportunities in Ghana, to commercialize its world class asset in Uganda and also take advantage of other opportunities that may present themselves in the coming months.
Commenting on the proposed Placing, Aidan Heavey, Chief Executive Officer said, "Tullow has had an outstanding year in 2008 and in recent weeks has announced major exploration and appraisal success in both Ghana and Uganda. Further potentially transformational wells will be drilled in 2009 in both locations. The Jubilee Phase 1 development is on track and the potential for additional phases has been confirmed. Secondly, Tullow has significantly exceeded the threshold in Uganda and now also regards the Lake Albert area as a world class basin. This success and future prospectivity, combined with the Placing announced today and the imminent closure of Tullow’s debt refinancing, will mean that Tullow will start 2009 from a position of significant financial and operational strength."
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